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Quantitative financial trading is one of the highest paying parts of the world’s highest paying industry. 25 to 30 year olds with outstanding maths skills can earn millions a year in an obscure set of ‘quant trading’ firms, where they program computers with predefined algorithms to trade very quickly and effectively.

This makes it an attractive workplace for people who want to ‘earn to give’, and we know several people who are able to donate over a million dollars a year to effective charities by working in quant trading. Who are these people? What is the job like? And is there a risk that their trading work directly harms the world?

To learn about all this I spoke at length with Alexander Gordon-Brown, who has worked as a quant trader in London for the last three and a half years and donated hundreds of thousands of pounds. We covered:

What quant traders do and how much they earn;

Whether their work is beneficial or harmful for the world;

How to figure out if you’re a good fit for quant trading, and if so how to break into the industry;

Whether Alex enjoys the work and finds it motivating, as well as what alternatives careers he considered;

What variety of positions are on offer in quant trading, and what the culture is like in the various firms;

How he decides where to donate, and whether he has persuaded his colleagues to join him in becoming major philanthropists.

Hedge fund trading may be the highest paying job in the world, so to learn more, we spoke with a former manager at one of the world’s leading hedge funds. They gave us the following information, which allowed us to make a rough estimate of the typical earnings of hedge fund traders.

We also ran this document past several other people in the industry and asked them to point out mistakes.

We found that junior traders typically earn $300k – $3m per year, and it’s possible to reach these roles in 4 – 8 years. Senior portfolio managers can easily earn over $10m per year, though average earnings are probably lower. Read on for the details.

How do hedge funds make money and how is it shared among the employees?

Hedge funds trade in financial markets on behalf of clients in exchange for annual fees, and a cut of the profits. They’re similar to mutual funds but face fewer restrictions on what they can invest in, and can only be used by accredited investors.

The revenue of a hedge fund comes from the fees on the assets it manages. The typical fund charges a fee of 2% of assets under management per year, plus a performance fee. The performance fee is typically 20% of any returns it makes for the clients over and above the 2% base fee. So, if a fund makes 10% returns in a year,

One of the concerns we’ve investigated is that certain parts of quantitative finance are a socially-useless competition between traders that only changes who gets some amount of income, not that someone gets it. I think this is the case, but the incredible amount of inequality in the world makes this argument against working in finance fairly weak.

If you are working in ‘low-latency arbitrage’, make a random clever trade on a stock exchange and beat some other trader to a profit by 1 millisecond, whose pocket is this money coming from? A poor African farmer? No, they have no wealth to take. A middle class American family? It’s possible, but most of their wealth, if they have any, is probably in their house or bank account.

We don’t have perfect figures here, but looking at reasonable estimates,

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80,000 Hours is part of the Centre for Effective Altruism, a registered charity in England and Wales (Charity Number 1149828) and a registered 501(c)(3) Exempt Organization in the USA (EIN 47-1988398).

We do our best to provide useful information, but how you use the information is up to you. We don’t take responsibility for any loss that results from the use of information on the site. Please consult our full legal disclaimer and privacy policy.